I would worry less about the vat man and more about his wife cynic that I am!

I think I would post the additional drinks to his directors loan account unless it is genuine business entertainment (In which case don't claim the vat, and the expense will get disallowed in the tax computation anyway but at least he won't have to put it through his dla).

You have the right thinking behind the second question. The subbie should really pay his own accommodation etc and invoice your client. Often clients do things this way in order to claim the vat back but it isn't allowable in my understanding. I think this needs to be pointed out to the client so he pays the subbies for their expenses rather than the hotels directly.

Thanks Rob, that's great.

BTW his wife is an employee and went on the business trip with him, so no worries there.

I think they've just got a little over excite and just put everything through the business whilst they were away, they're going to love me!!!!

Elaine

Well I've posted the grocery shop and booze against the directors loan account (outside the scope for VAT), as I agree that this shouldn't  be treated as a business expenses and I've really appreciated the comments as it's a bit of a worry that you're doing the right thing for the client.

I'm still a little unsure about the situation with the sub-contractors, I've decided not to reclaim the VAT on the accommodation and subsistence paid on behalf of the subcontractors and I've recorded this expenditure separately on the accounts so that the accountant can see that this is not an employee expenditure, hope that's correct?

Hi Joanne

Sorry I've somehow missed your comment.

I think he's probably been listening to Jo Blogs' in the pub telling him that he can put everything through his business, make's it really hard when you tell them that they can't or if we question it.

I have now spoken to my client and he wasn't happy that he couldn't reclaim VAT on Business Entertainment, he also questioned my putting the bar bill through his directors loan account, explaining that he only has a couple of beers and a bottle of wine with his meal; he seemed OK when I explained that we really needed to be careful that we didn't put item's through as subsistence when they clearly are not (i.e. an expensive bottle of wine) as this could result in HMRC delving deeper into his accounts under inspection and a possibility of genuine business expenditure being disallowed and, at the end of the day, if I've picked it up then you can bet your bottom dollar HMRC will/

I also found an article on what counts as subsistence which explained that subsistence is really only on meals (whilst working away from home) as the cost of purchasing a meal is considered to be, in general, more expensive than having a home cooked meal and therefore the difference between the cost of the home cooked meal and the meal at a café or restaurant  is really the business element of the expenditure but HMRC allow the whole cost because it would be impossible to make such a calculation. This helped me explain to the client that I couldn't allow the shopping bought whilst on their business trip as it didn't really incur any additional expenditure than it would have done if he had been at home and would therefore be considered as eating to live.

Again he seemed to understand my explanation, however he did ask me if I had any good news!!!!